Delbros - Implementing BPO to provide economies of scale

For Delgado Brothers, Inc., or Delbros, logistics these days calls for more than the simple physical delivery of goods. More and more customers have been demanding up-to-the-minute information -- where the shipments are, what they contain, and when they will arrive. And for Delbros to meet the ever-changing customers' demands whenever they need it requires a consistent focus on what it does well.

Delbros beginnings

In 1946, Antonio C. Delgado together with brothers Jose and Francisco, introduced an innovative and enterprising concept called "Caltex Floating Station," which provided a more systematic method of servicing the fuel and water ships docked in Manila Bay. By 1949, a new company called Delgado Brothers, Inc., or Delbros was established.

In the 1950s, Delbros offered the country’s first professional overseas removals and household moving services. In the following years, the company’s introduction of containerization elevated the quality of international cargo handling in the Philippines.

[Karl Note:  In 1963, about, the two brothers were running their company.  They each had one son who had graduated from a Business School in the US.  They hired Karl as an interim EVP who was older than the two boys, had similar educational background, and could help bring the boys into their ownership and management.]

 

Delbros warehouse facility with workers

 

In the midst of nationwide political, social, and economic turmoil in the 1970s, the company continued to build its business as the largest fully integrated transportation company in the Philippines, offering air, land and sea freight forwarding service. During the Vietnam War, Delbros was also the country's largest military mover.

Throughout the years, Delbros has become the Total Transportation Company. The multi-modal concept, which it pioneered, offered door-to-door service for cargo shipments -- from small letter envelopes to heavy machinery. The service capabilities of the company are now nationwide with the opening of offices in major provincial capitals around the country.

Delbros has consistently upgraded, secured, and developed the latest equipment and logistics software to facilitate the vital flow of information to customers. It can generate, on demand, customized reports, warehouse inventory, shipment tracking information and verification information while supporting other logistics processing services.

Economies of scale

“We are a supply chain solutions provider,” said Delbros President, Jose Eduardo C. Delgado. “In this country, a lot of companies still handle their own physical distribution under the concept that they all started small and pretty soon realized that they were a transportation company, as well as a warehouse company. That is hitting a brickwall because in every expansion that they do like adding more stores, newer products, and expanded facilities such as more trucks and warehouses, their investments increase. This strategy will seldom lead to economies of scale, a classic reason to go into Business Process Outsourcing.”

 

Delbros Warehose facility

 

Delbros started looking to outsource non-core business processes whenever it could. It recently considered outsourcing its accounting operations.

Throughout its 54 years of history, Delbros has been practicing its accounting system unchanged. In Mr. Delgado’s mindset, he does not believe the way it does accounting is efficient enough to help its business grow.

“I thoroughly believe in doing our core expertise. Primarily, my background is the jack of all trades but as I grow in my business, I want to focus on things that we do well,” he added.

What Delbros looks forward to in outsourcing vendors such as Fujitsu Philippines, Inc. is their expertise in the company’s non-core business processes. “Is our accounting system still valid, can we simplify and lessen our work processes and come out with the same results? I like to have experts with the best practices used worldwide to be able to do it for us,” he said.

“We are more computerized now and we still have a number of accounting people. My question now is can we outsource our accounting process? In doing so, our accounting people who may be good at a certain skill level can be upgraded to areas that are producing profit than be in a department that is a cost center,” he stressed.

The next question he emphasized is that can Delbros get a better service than what it is currently doing? “Ultimately, that matters. If we have to do our own accounting and perhaps put up our own IT department, we have to decide whether we wanted to be a total transportation company, or a computer company,” Mr. Delgado pointed out.

Business value of BPO

Mr. Delgado hoped to get a lot of business benefits when implementing BPO. “I hope to have a lower overhead because these are back office applications and outsourcing accounting, for instance, can save us more office spaces. In addition, our accounting people will be farmed out to other parts of the company that require their services - not as bookkeepers but in the billing department because that carries a pretty heavy work load.”

 

Mr. Jose Eduardo C. Delgado (President of Delbros)

 

And the Delbros president also wanted to just produce charged invoices that the company is supposed to be billing the customer and send these documents to its outsourced accounting department to take care of putting the data in Delbros' P & L records.

“And for the expenses, all we have to do is have a couple of people receive the invoices from all our suppliers and go through the process of checking if they are ok, and send to our outsourced accounting department for booking,” said Mr. Delgado.

One major consideration in choosing an outsourcing vendor is primarily synergy, “where the vendor’s economies of scale will benefit my company in which outsourcing is going to cost me less than what is costing me when internally doing the process ourselves. And reducing my cost comes in various forms: less airconditioning and reduction of office space.”

Delbros expects FPI as outsourcing vendor to offer non-core business processes that help the company’s non-core functions run efficiently. “We don’t have to train anybody to use a new technology like throwing in a server and software to run the process. We don’t even have to worry about maintaining anything. I just email FPI our database and email back to us the results. And FPI will just send one person to collect all the documents that we produce once a week - file it properly and do it in a professionally manner,” he replied.

“I want to do outsourcing with FPI if we will be able to save money. How to save money comes in both ways - I would not want FPI to try to follow the way we are doing our accounting system and make a proposal based on that because that proposal only adds costs,” he further said.

“The main question I would like to ask when we start outsourcing (with FPI) is that for the size of the company that we are now, how much accounting do we need? Why? May be we are asking what we don’t really need and use. And so FPI can perhaps come up with a process that is so much simpler and more efficient to the point that is less costly than what is costing me now because we have actually reengineered the process.”

Stiffer competition

For 2003 and beyond, Mr. Delgado hoped to see the Philippines' economic conditions to improve. "We have been in contraction for so long. And because of this condition, corporations have stiffer competition in the markets they play. Companies like Delbros always have to be one step ahead of the others - we always need to be leading the pack. If we don't innovate, we won't survive in our highly competitive market." he claimed.

And through BPO, the Delbros chief man also hoped to see the company propel itself to even greater heights in innovation and efficiency.